Value your Staffing Agency

Profitable staffing firms are typically evaluated based on a multiple of adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This multiple reflects a company’s earnings and financial health. Some evaluations also factor in working capital, the variance between current assets and current liabilities, especially in professional staffing and service sectors.

Understanding a buyer’s considerations in their multiple is crucial for making fair comparisons between potential buyers. Additionally, interpretations may differ regarding which adjustments are acceptable to a given buyer. For instance, adjustments may include adding back or normalizing owner compensation with a replacement amount. The appropriateness of such adjustments, like the replacement cost, varies among buyers, impacting the final valuation.

In essence, the multiple is a numeric expression used to determine the business’s worth. For example, a buyer’s multiple of 8x EBITDA may represent a different dollar value depending on the specifics of the evaluation.

To determine the EBITDA of your business, start with Earnings Before Taxes, excluding interest expenses, financing costs, depreciation, amortization, donations, and interest income. This calculation provides a clear picture of your business’s financial performance and lays the foundation for a comprehensive understanding of its value in the eyes of potential buyers.